Tuesday May 12, 08:08 AM
Microsoft bond issue sparks takeover rumors
WASHINGTON (AFP) - Microsoft (NASDAQ: MSFT - news) has launched its first bond issue in hopes of raising 3.75 billion dollars, sparking rumors the US software giant was contemplating a takeover bid.
Microsoft, in a filing with the US Securities and Exchange Commission (SEC), said that it would use the money from the bond issue launched Monday for "general corporate purposes" and planned to offer five-year, 10-year and 30-year notes.
The Redmond, Washington-based company announced its offering, which is set to close on May 18, would reach 3.75 billion dollars of senior unsecured notes.
Microsoft offered notes that would mature in five, 10 and 30 years. The sale was divided into two billion dollars of 2.95 percent notes due June 1, 2014; one billion dollars of 4.20 percent notes due June 1, 2019 and 750 million dollars of 5.20 percent notes due June 1, 2039.
The software giant "intends to use the net proceeds from the offering for general corporate purposes, which may include funding for working capital, capital expenditures, repurchases of stock and acquisitions," it said in a statement.
Microsoft has already issued two billion dollars in commercial paper, or short-term debt, under a six-billion-dollar debt authorization made by its board late last year.
Moody's Investors Service assigned a "AAA (Xetra: 722800 - news) " rating, its highest, to the offering.
"The AAA rating for the company's inaugural debt issuance reflects the company's position as the world's largest software company with a strong and defensible market position throughout its diverse core offerings," Moody's Richard Lane said.
Moody's added that Microsoft's "very strong debt protection measures are supported by over 22 billion dollars of operating profit and nearly 12 billion dollars of free cash flow in a challenging business environment."
The company was rebuffed last year in a 47.5-billion-dollar bid to take over Yahoo (NASDAQ: YHOO - news) ! but management has since changed at the Internet firm and the two companies have reportedly discussed a potential partnership.
Microsoft chief executive Steve Ballmer has said repeatedly that he is open to a tieup with Yahoo! on Web search, dominated by rival Google (NASDAQ: GOOG - news) .
Business software firm SAP (Xetra: 716460 - news) was seen as another potential target for Microsoft.
Microsoft shed 0.51 percent in New York on Monday to close at 19.32 dollars.
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